The Wall Street That I Once Knew No Longer Exists
(Bloomberg Opinion) -- I graduated from the Coast Guard Academy in 1996. It was a tough time to attend one of the U.S. Service Academies, and I suffered all manner of indignities. I was once shaved with a bayonet by an upperclassman. I was made to do 2,000 push-ups in a day. And with 101 days to go until graduation, the barracks were turned into a war zone known as “101st Night,” with round-the-clock hazing and physical discipline that bordered on abuse. My class’s experience with 101st Night was so extreme that it was immediately banned from then on.
My memories of that period in my life are pretty good, however. It was a crucible, of sorts, and I’m glad I went through it because it gave me the mental toughness that I have today. The Coast Guard is no longer like that, and it was in the process of transforming into a “kinder, gentler” service toward the end of my tenure at the Academy. In last year’s “Swab Summer,” the Coast Guard Academy’s version of basic training, they banned yelling.
Wall Street has undergone a not so dissimilar transformation. There was a lot of yelling when I was there from 1999 to 2008, but there was a lot of a bank’s own capital being committed and a lot of risk being transferred. I probably did more yelling than anyone, and I got yelled at plenty. But at the end of the day, nobody took anything personally. If someone yelled on a trading floor today, it would probably be a career-limiting move.
Today, Citigroup Inc., Bank of America Corp. and Citadel Securities are reversing policies and letting people work from home for longer. And that’s not solely because of rising Covid-19 infection rates, but also because their employees seem happy to be working from home and inconvenienced by having to go into the office. Morgan Stanley just relaxed and widened its parental leave polices, and is contributing more to employee 401(k) plans. Goldman Sachs Group Inc. said it will soon offer expanded leave for family care and bereavement. Earlier this year, UBS AG sent out a memo to remind employees they are entitled to a “Wellness Hour” each day. This all comes after efforts to cap the hours worked by junior bankers and interns.
These changes are due purely to labor dynamics. Sure bonuses remain high for a select few, and average salaries including bonuses reached $438,450 last year, but due to increased regulations, Wall Street isn’t the golden ticket that it once was for the masses. Banks have to compete for talent with traditional tech companies, new FinTech firms and cryptocurrency startups, to name just a few.
The industry went through a similar convulsion in the late 1990s, but that really just amounted to modified dress codes to align with tech firms that allowed employees to wear T-shirts and play foosball in the office. I was working at Lehman Brothers Holdings Inc. at the time, and Chief Executive Officer Dick Fuld resisted allowing business casual at the office, wanting his employees in suits. He eventually acquiesced, but about two years later, after the dot-com bubble imploded, Lehman went back to suits and stuck with a formal dress code for the duration of the firm.
Wall Street isn’t as stressful as it once was. The business of risk transfer has mostly disappeared, at least in equities, and replaced by algorithmic trading. Value at Risk, or VaR, at the big Wall Street banks has been steadily declining. There is, however, a different kind of stress on Wall Street now, and a lot of it deals with the fear of saying or doing the wrong thing, the fear of sending an inappropriate email, the fear of accidently running afoul of excessive compliance and regulation, and the potential to lose your career simply by pushing the wrong button. Electronic communications didn’t seem to be monitored when I worked at Lehman. As a result of wrongdoings like the Libor scandal, today all emails, instant messages and phone calls are all monitored. There’s plenty of opportunity to make an honest mistake that could cost you dearly.
This may not seem like progress, but it is. And it’s a good thing that banks are becoming more hospitable places to work because Wall Street has been pretty uncivilized at times. There are a lot of tough Generation Xers who like to tell stories about how tough it was in the old days on Wall Street and how easy “the kids” have it now. True, the risk of being hit by a flying phone is approaching zero and there may be more creature comforts, but the job has gotten a lot more tedious. When I think about Wall Street today, I don’t lament the loss of the macho trader culture. But I do lament the loss of risk-taking. That was the thrilling aspect that made working in a pressure cooker fun, not the creature comforts.
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Jared Dillian is the editor and publisher of The Daily Dirtnap, investment strategist at Mauldin Economics, and the author of "Street Freak" and "All the Evil of This World." He may have a stake in the areas he writes about.
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